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We have undercharged maintenance for some units for 5-7 years. How far back can we go and collect the outstanding maintenance for? Is there a statute of limitation on what we can collect? The mistake was made on the managing agents site. Can they be held responsible as well if we cannot collect the entire amount from the shareholders?
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Hi JD and JG,
I have some additional thoughts. You definitely need a lawyer. My concern is that if you do not add the amounts to their bills and collect the undercharged amounts; the Board could unintentionally create a second class of stock. I mean that to say if you are a co-op, all maintenance charges are allocated by share. If you don’t collect, you have allocated them less than everyone else and could face accusations of discrimination by the shareholders that were charged correctly. (I would hate to think that you would have to refund everyone else just to make things equal if you don’t try to collect the undercharged owners). If you are ultimately having trouble collecting, one strategy is to charge the bills and collect the funds upon the transfer of the unit with the appropriate monthly late fees &/or interest.
Additionally, even if a Board hires a management company to provide services like billing and accounting, the Board is still responsible for the results (or an accounting firm and etc.). The Board must provide oversight. This does not preclude legal action if management does something wrong and the corporation suffers harm. However, Board oversight can often prevent errors in the first place.
Sincerely,
Steve
I remember a few years ago that the Habitat Board had many postings on this problem and the consensus was not to do anything, except of course adjust the maintenance up or down. This made perfect sense to me because in order for the coop to be left revenue neutral you would have to charge the under payers to be able to pay the over payers which could be a major burden for some as the discrepancy could go back many years. I do not understand just charging the under payers, aren't there overpayers in the coop? However, I became aware of a situation that completely baffles me. A few years ago it seems the accountant for a coop found the same problem, but stated that only the Overpayers had to be reimbursed, nothing about the underpayers ; the lawyer for the coop agreed on this. Since the coop did not have the funds, the board passed a 13% assessment in order to repay the overpayers based on the accountant's schedule. This seemed ridiculous to me as the underpayers are not paying as much as they would if they were charged; but the overpayers were being charged to pay back themselves increasing their burden; however the underpayers were not paid back. Then the next year it was again decided that the overpayers must be reimbursed and in order to do so, the board passed a 14% increase and assessment; again the overpayers were not reimbursed, but all the shareholders had paid the assessments, what happened to the funds was not disclosed. At this point the accountant is still including the original liability on the financials, as a payable to shareholders ,with a note attached, I can't understand this as a lot of the parties on both sides have moved so the liability at least should be adjusted or removed Neither the accountant nor the lawyer has commented on the fact that the overpayers have not been repaid, even with the 2 assessments. Could anyone explain this .
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There is no simple answer. An attorney could advise you about a statute of limitations, if one applies or not, and couild also discuss the 'thoughts' which follow.
How many units are involved, and what is the % of all units/shares?
I guess your actions would depend somewhat on how much $$ is involved.
If it can be shown that the management co. is at fault, a conversation needs to be held with the principals there to see if they will cure the problem themselves or not, or will they attempt to contact the units themselves and work something out?
Shareholders should know what they are responsible for paying, but many don't read mailings and rely on the maintenance bills to be accurate, making the assumption that they are calculated correctly.
You can also look to your insurance company as well as the management's insurance company if you can't get satisfaction from the management co directly.
A simple check of the financial statements each year should have revealed a shortfall on annual maintenance received/billed, based on # of shares outstanding and the rates in effect.
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